risk management (No Initial Caps), Condensed

 

The Battle of Jutland was an epic naval engagement that occurred from May 31 through June 1, 1916, between the English Royal Navy Grand Fleet and the German High Seas Fleet in the North Sea waters around Denmark. Over 240 ships were involved in what would become the largest naval engagement of World War I. Despite its massive scale, Germany was unable to break the blockade imposed by the British, and the significantly reduced fleets returned to their home ports with the status quo largely unchanged. There is a distinct possibility that Jutland is the most analyzed naval battle in history, but an American journalist working for the New York Times summed up the battle as “The German Navy has assaulted its jailer, but is still in jail.”[i]

I just love it when seemingly complex and highly layered events, literature, or ideas can be reduced to their basics. From the website Awkward.com comes this distilled version of Jane Eyre:

Jane Eyre

By Charlotte Bronte

Ultra-Condensed by Samuel Stoddard

(People are mean to Jane Eyre)

Edward Rochester

I have a dark secret. Will you stay with me no matter what?

Jane Eyre

Yes.

Edward Rochester

My secret is that I have a lunatic wife.

Jane Eyre

Bye.

(Jane Eyre leaves. Somebody dies. Jane Eyre returns.)

The End[ii]

My super-sensitive blogger’s ears can hear GTIM Nation say “But Michael! If large-scale historical events and instances of classical literature can be so reduced, doesn’t that imply that otherwise complex and layered theories within the Management Sciences can be, too?” To which I reply, yes, yes they can. Naturally, my mind turns to one of my favorite targets, the risk managers (no initial caps).

Of course, modern risk management (I’m just going to start using the acronym nic, so I don’t come across as redundant) is a massive industry, with piles and piles of literature describing its preferred techniques within the PM environment. And yet I believe that the whole shebang as it applies specifically to PM can be reduced to the following central question: If something goes wrong, who is going to pay for it? I’ll explain.

Consider the Firm Fixed Price (FFP) contract. The customer pays for the successful completion of the scope, by a specific date, for an agreed-to price. The contractor is on the hook for anything that goes wrong, whether it be weather, poor performance, force majeure, whatever. While risk managers (nic) may be very active in developing the analysis that helps inform whether or not the contractor should pursue the work in the first place, they really have no role post-contract award. The central question has already been answered.

But when we move into the other types of contracts, specifically the Cost-Plus variety (Cost Plus Fixed Fee, Cost Plus Award Fee), the central question is suddenly thrust into confusion. This is where the generation of post-project adjustments or adjudications occur, since such conflicts don’t arise if the project is successfully delivered on-time, on-budget. Something went wrong, and, unless the central question has been answered in a way that’s amenable to both parties, some form of conflict is inevitable.

In those cases where something has gone wrong, but the project is still in process, Change Control becomes the arena for discerning the answer to who pays, which is why Baseline Change Control is often such a formal process. For those of you fortunate enough to have not endured a Baseline Change Control Board proceeding, the main issues almost always revolve around (1) what went wrong?, (2) by how much (specifically, the cost and schedule impact), and, perhaps most importantly, (3) who’s to blame? Because if the contractor is performing poorly, or has selected a manifestly improper technical approach to accomplishing the project’s scope, then there’s really no case for even asking the client to pay for the reversal, even if the Contingency Reserve has been funded (NOT an automatic, by the way). The two most common ways by which the contractor asserts that it is appropriate to either tap the Contingency Reserve or request more budget is to assert that the setback was caused by the customer adding scope (scope creep), or point to any entry in the risk register (nic) that documented that the thing that went wrong was predicted (albeit with Gaussian hedging), and therefor falls under the “known unknowns” rubric. Itself reduced, it’s another way of the contractor saying “See! I told you this might happen. Now you have to pay for it!”, which is an additional indicator that all of risk management (nic) within the PM realm can be reduced to the question “If something goes wrong, who is going to pay for it?”

While the preponderance of the risk management (nic) industry would doubtless object to my summation, I don’t mind. I wouldn’t imagine Charlotte Bronte fans would be okay with Mr. Stoddard’s synopsis, either.

[i] Retrieved from https://strategyinhistory.com/the-battle-of-jutland-the-use-and-mis-use-of-sigint/ on 19 December 2023, 19:36 MST.

[ii] Retrieved from https://awkward.com/enjoy-these-condensed-versions-of-classic-books/ on 19 December 2023, 20:13 MST.